Nigeria Air’s business model defective, says Capt. Nwuba
The President of Aircraft Owners and Pilots Association of Nigeria, Capt. Alex Nwuba has described the business model of the proposed Nigeria Air as defective, as it fails to address fundamental issues in the aviation sector.
Nwuba, who spoke with the League of Airport and Aviation Correspondents (LAAC) at the 26th Annual Conference held in Lagos recently, faulted the approval of the Federal Executive Council for the lease of three aircraft to begin operation of the airline.
According to him, the idea of leasing aircraft from a foreign airline to start a national carrier “is completely warped,” considering that it will stifle the industry of forex and create room for capital flight amidst fuel scarcity.
“I’m excited to hear something is happening but I think it is completely warped. The reason is that the Federal Executive Council is like a judge that sits in a court. He makes his judgement on the basis of the information that is presented to him. So an agreement is presented that we need three aircraft of two brands to come into the market to serve the domestic market sounds like a good idea.
“But let’s ask some fundamental questions. The market exists. Airlines are operating in this market, they have challenges with the price of fuel, and they have challenges with foreign exchange to pay suppliers. You even have the challenge of airlines that are selling tickets, hundreds of millions of dollars that cannot repatriate those funds. How will these three planes operate on the basis of the wet lease?
“What’s a wet lease? A wet lease is an arrangement where the government has engaged an airline outside the country to bring aircraft and crew. So how does that solve our problem as a nation in terms of creating employment as an industry? How does that solve the problem of foreign exchange that we are already facing because we had to pay for that wet lease in foreign exchange?
“How does that solve the problem of availability of funds through the Central Bank or will the national carrier get its money through the black market to fund its operation? It is absurd, it’s essentially an absurd proposal made to a group of people that have no knowledge of what’s going on and they are acting like judges receiving information which they judge without basic facts,” said Nwuba.
On whether the airline will succeed with a defective model, Nwuba said the idea to acquire aircraft on wet lease is a poor business model that will only decimate the industry, and sap it of forex without creating jobs.
“It can happen; in fact, anything can happen. I remember seeing a video of somebody that used to the airplanes. One day, he jumped on board, started the engine, taxied to the runway, came up and crashed the aircraft. That’s essentially what I see in this process going on. There is really no benefit from the wet lease when we pay for the airplanes in forex, pay for the foreign crew, we don’t create any employment.
“So this is not what we want as a national carrier. We are not addressing the challenges. This national carrier, as noted, holds nothing but decimates the existing domestic airline industry and that’s not the job of the Federal Ministry of Aviation,” he said.
Nwuba called on the Federal Government to market and sell the 51 per cent shares for the Nigerian public through the stock exchange, so as to invigorate the stock exchange platform and allow aviation practitioners and stakeholders key into the process.
“One of the ways is to go to the market and sell the 51 per cent for the Nigerian public through the stock exchange. That would invigorate the stock exchange. It will get the stakeholders’ buy-in. The average Nigerian will be able to put a few dollars that they put in MTN shares and buy into the national carrier.
“They will have access to the money to actually buy airplanes or enter into a dry lease arrangement, which is essentially a finance lease and make payment over a period of time; even though in the finance industry where I work, doing a finance lease in dollars for domestic operations earning naira makes no sense at this age of the economic cycle that we are in.
“Maybe we pay cash for the airplanes and bring them in. Otherwise, you will lease an airplane for N700 to a Dollar. By the end of the year, it’s 1000, you can’t make those lease payments. So we need to take this product to the market, get the stakeholders’ buy-in, create new jobs within the Nigerian economy, and create new solutions. Bringing in wet lease airplanes from abroad to fly domestic business makes absolutely no business sense,” Nwuba explained.
